Countries in the Region Should Invest 6.2% of Annual GDP to Satisfy Infrastructure Demands

The transportation sector has drawn the biggest amount of investment in infrastructure since 2005, followed by energy, telecommunications, and water and sanitation.

Photo: Edgar Negrete/EFE

(October 13, 2014) The region’s countries should invest annually 6.2% of their Gross Domestic Product (GDP)—some $320 billion dollars—to satisfy their infrastructure demands in the period 2012-2020, according to new estimates released today by the Economic Commission for Latin America and the Caribbean (ECLAC).

That is the conclusion of a United Nations organization’s study, which was prepared by the Infrastructure Services Unit of ECLAC’s Natural Resources and Infrastructure Division.

In the report, ECLAC unveils the Economic Infrastructure Investment in Latin America and the Caribbean Database 1980-2012 (EII-LAC-DB), which collects and systematizes figures by country and investment origin (public or private) and updates the annual investment requirements in four main economic infrastructure sectors (transportation, energy, telecommunications, and water and sanitation) to respond to the needs that will arise from the region’s companies and end users in that same period.

The figure of 6.2% of GDP comes from applying the investment trajectory to expected infrastructure needs, and it assumes that the historic pattern of country investments will be repeated. As such, it is an approximation and not a strict recommendation, the document indicates.

According to the report, the average 2.7% of GDP allotted to infrastructure investment in the last decade shows that the region is not investing enough. The study also says that an adequate response to requirements in this field is key for the region’s insertion in the global economy in the XXI century and for its people’s quality of life.

An analysis of the figures in the EII-LAC-DB database reveals a trend towards increasing investment in the aforementioned four economic infrastructure sectors during the period 2003-2012. The transportation sector has drawn the biggest amount of investment since 2005, followed by energy, telecommunications, and water and sanitation.

According to the report, in 2012 (the last year available), average regional investment in the four sectors was 3.49% of GDP. That year, Costa Rica was the country that invested the most in infrastructure (5.47% of GDP total in public and private investment), followed by Uruguay (5.08%), Nicaragua (4.93%), Bolivia (4.47%), Peru (4.46%) and Brazil (4.10%).

According to ECLAC, investment in infrastructure projects contributes to increasing the coverage and quality of public services (for example, health, education and recreation) and reduces the costs associated with mobility and logistics, which in turn improves access to markets of goods, services, employment and financing, providing a favorable environment for improvements in the population’s overall well-being.

Therefore, the Commission stresses that countries must examine the patterns in their investment decisions to orient them towards new infrastructures that reinforce the path to equality, with sustainability and inclusion.